Is $500k enough to retire at age 60?

can i retire at 60 with 500k

Most people assume that the retirement age is 65 because this has long been the traditional age required for Social Security benefits. However, it has increased to 66 or 67 in recent years, depending on when you were born. Still, many people want to retire earlier than that, so they have plenty of opportunities to travel or enjoy the life they want without having to worry about full-time work. Retiring at age 60 is a good balance between retiring early, but still giving yourself plenty of time to accumulate enough savings to live comfortably in retirement. However, many have less savings than they would like when it comes time to retire. When planning for retirement, you can work with a financial advisor to help manage your investments.

Is $500k enough to retire at age 60?

The amount of money you need to retire, regardless of age, will depend entirely on a number of factors unique to your individual situation. The answer to whether $500,000 is “enough” to retire you at 60 may be completely different than someone else trying to do something similar. In general, you can retire at 60 with $500,000, but you may not like the amount of income you have or it may not be enough for your needs. However, some people can retire on less.

Here are three things to consider when deciding whether you have enough money to retire:

  • Desired lifestyle: The lifestyle you want in retirement will largely determine whether or not this is enough money for you. Do you like to travel a lot? Do you plan to live in a foreign country? Answers to all these questions will provide different requirements for what you will need in retirement.

  • Living situation: Are you a paid off home owner where you plan to live, or will you be renting during your retirement? The costs associated with both can create very different financial needs.

  • Your health care plan: At age 60 you won’t be eligible for medical care yet, so you’ll need to have a different plan to cover your health care costs, and they won’t necessarily be cheap. If your health history is not as strong as others, those costs can increase even more.

Obviously there are more items you can consider that could cause your retirement number to fluctuate. But these are three of the biggest costs that are likely to affect everyone to varying degrees.

How long will $500k last in retirement?

The length of time it takes for your money to break even will depend on your lifestyle and personal expenses. The amount of time the money will last is also greatly reduced if you have a spouse who is living off the same amount of funds. The amount you withdraw each year will also slightly change the number of years the money lasts.

For example, the 4% rule would dictate that you can safely withdraw $20,000 from your funds each year and that $500,000 will last you at least 30 years. That’s not a lot of money for one person, much less two. The average retiree in 2020 spent a little more than $45,000 for the year, according to the Bureau of Labor Statistics (BLS). So, in order to have the money to live through your entire life expectancy you would probably need to live a frugal life without many extra expenses.

The length of time will also be affected by how you are investing your funds during your retirement years. If you are just living on the $500,000 of your savings without investment during these years, the funds are unlikely to last more than 10 or 12 years, depending on where you live. However, if invested in the right places it can last much longer.

Where You Could Invest Your Money For Longevity

can i retire at 60 with 500k

can i retire at 60 with 500k

If you’re looking to stretch your retirement dollars, you’re probably trying to think about how you can earn more income from your funds or what types of investments have the highest returns over time. This is where becoming a more educated DIY investor or working with a financial advisor can be very helpful.

Some examples of investments that can help you with this are stocks, bonds, real estate investment trusts (REITs) or annuities. Bonds are the most stable but also offer the lowest potential return compared to similar investments. Both stocks and REITs provide long-term stability but can fluctuate in the short-term, which can hurt you badly in retirement. However, both can provide good results over a retirement period. Certain stocks can also pay dividends which can help you earn extra income from your investments.

A possible investment could be an annuity if you’re looking for guaranteed income with your $500,000 during retirement. Annuities are basically contracts you sign with an insurance company where you pay a premium in exchange for guaranteed payments later. You can use an immediate annuity that starts right away, but it’s likely to pay back less than a longer-term contract.

Invest in an Annuity

There are multiple types of annuities, such as fixed or variable annuities. The fixed annuity guarantees repayment of the principal amount you paid in along with a small amount of interest. Your payments do not change during the life of your contract. With a variable annuity, your principal is still guaranteed but the returns you get are different. These have a higher risk threshold but can provide greater returns during retirement.

You can also get a lifetime income rider that guarantees you income for your entire life and not just for a specific period of time. However, this will cost more on the monthly premium. This may be the best way to stretch your $500,000 if you find that an annuity works for you.

Annuities have many advantages and disadvantages, such as how they are taxed and when you can withdraw the principal. But ultimately it’s worth considering if you have less income than you’d need in retirement. Buying an annuity allows many people to retire at age 60 with only $500,000 without sacrificing their normal lifestyle.

Other Factors to Consider When Saving for Retirement

There are so many things to consider if you’re thinking about early retirement, however, that go beyond where your income will come from. When you retire you are likely to be behind on some things that you weren’t before, such as the full cost of your health insurance. Here’s a list of four things that can change how much money you’ll need for retirement, which you should consider before you invest:

  • Inflation: The cost of retiring at 60 in 10 years will be more than the cost of retiring at 60 today. It’s important to make sure you take that into account when running your own numbers.

  • Where do you plan to retire: Getting fired in New York City will be very different from getting fired in North Dakota. Costs will vary greatly so the cost of living will have a big impact on how much money you will need.

  • Insurance: You will have to pay for health insurance since you still won’t qualify for medical care, as discussed earlier. You need a plan for where this insurance will come from and how much it will be.

  • Part-time work: Many people work part-time during retirement, especially if they retire early. Not only does it provide you with additional income, reducing how far your $500,000 has to go, but it can also give you a nice purpose during the week.

Base line

can i retire at 60 with 500k

can i retire at 60 with 500k

Overall, it is possible to retire at 60 with $500,000 but it may not be possible for you. It really depends on your personal living situation and what your expected expenses will be. Once you can calculate that, you will know how you should invest your funds to ensure that you have enough income in retirement to live a sustainable life that you can personally enjoy.

Tips for Saving for Retirement

  • Working to earn money for retirement takes a lot of time so it can be difficult to manage your retirement plans at the same time. Consider using a financial advisor to help you create a retirement plan. SmartAsset’s free tool matches you with up to three financial advisors serving your area, and you can interview your advisor at no cost to decide which one is right for you. If you’re ready to find an advisor to help you achieve your financial goals, get started now.

  • You can also use SmartAsset’s retirement calculator to help you estimate how much you might need to save to live the retirement life you want.

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The post Can You Retire at 60 With $500,000? appeared first on SmartAsset Blog.

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